Supervisor David Campos will introduce legislation this afternoon that would require landlords in San Francisco who evoke the Ellis Act to pay evicted tenants the difference between their current rent and a comparable market rate unit, times twenty-four.

Currently, the city requires building owners to pay each tenant evicted under the Ellis Act $5,261 in relocation fees, with a cap of $15,783 per unit. Disabled or elderly tenants receive an extra $3,508. The amounts are adjusted annually for inflation, and half must be paid at the time an eviction notice is served, the other half once the tenant moves out.

Under Campos’ proposal, the difference between a unit’s monthly rent and a “comparable” unit would be determined by the city controller’s office, multiplied by 24 months and divided among the evicted tenants. An evicted tenant would receive either the $5,261 or the difference in rent, whichever is more.

Likely to be challenged in the courts should it pass, Campos is positioning the proposed legislation as an act “to combat displacement” rather than to discourage the use of the Ellis Act which is state law.

So… he’s trying to make sure no one ever rents an open unit ever again? Because why anyone would voluntarily subject them self to this, rather than cashing out by way of selling a TIC share makes absolutely no sense. Hooray for further diminished rental inventory and even higher rents!

I find it curious that the landlords’ lobby is opposing Campos’s measure on the ground that it’s not means-tested, rather than on the ground that its manifest purpose–deterring Ellis Act evictions–is contrary to state law.
Anyone care to illuminate the politics or the law for me?

Would it be that terrible if the city shifted from renting to owning, assuming that we can increase affordable housing? One of the recurring complaints is that people renting for 15-20+ years are getting evicted, but shouldn’t these people be owing if they really want a place forever?

I wouldn’t be so sure it’s illegal. Google the 2006 Court of Appeals case upholding SF ordinance which established the Ellis Act payouts in the first instance (a decision which was allowed to stand by the California Supreme Court). It implies that unless the payouts are huge, a facial challenge could have issues.
I do agree that this will just lead to more open units, and higher rents in every re-rented flat.

formidable doer, as the saying goes they shook up America from the East Coast and all the lose ones fell in San Francisco.
I am not sure if they understand that the main reason SF cannot build its utopian “everyone’s welcome except, well, people we do not like” is that SF is in CA which itself is contained in the US.
Ending rent control would kill 2 birds with one stone:
1 – level the field between landlord and tenant
2 – automatically flush out the delusional maladjusted forever malcontent who found a safe haven in SF.

I don’t get why all the ss landlords are posting the unhinged attacks on this.
The way I read this is, a landlord who wants to get out of the landlording business (which is what the Ellis Act is supposed to be used for) pays the tenants evicted, and then that amount gets paid to the evictee, who then can use it to pay their first, last, and security deposit to their next landlord.
So in essence, this is just a capital gain transfer from the landlord who’s giving up to the current income account of another landlord who’s continuing in business.
If a private financial intermediary like an investment bank or securities trading operation managed to pull this off everyone would be describing this as a new financial innovation and a victory for capitalism.

“I wouldn’t be so sure it’s illegal.”
Yeah, there’s allready a payout provision which has been upheld. And Campos’s proposal just changes the amount of the payout. So I don’t see what grounds anyone could challange it on.
Not that I agree with Campos’s proposal though, just don’t see it being struck down by a court.

Brahma, under what legal or economical principle would a tenant be entitled to a share of the profit on someone else’s property?
Heck, I have been drinking tons of coffee at my local Illy and they sure should cut me into their profit sharing program!

“Just a novice question, but if this is legal, would it be theoretically be possible to raise the eviction fee to $10 million for each tenant, and make the tenant a de facto owner of the building?”
I think that was addressed in the challange to the current payouts. If the payout was essentially punative or so excessive as to effectively nullify the Ellis act that would most likely get struck down.

What amazes me is the blindness of these proposals – they keep adding to the regulatory tree trying to “help” tenants, when the problem lies at the roots. Even setting aside rent control (which I think should be in place for renters as long as Prop 13 is in place for owners), the core problem is lack of housing.
So instead of adding to regulatory burdens on landlords, Campos, let’s streamline the building process. Eliminate NIMBY “appeals” of projects that fit within existing zoning – in fact, grant incentives to developers who build up to the zoning limit, instead of under-building.
Get some housing stock generated, and a big portion of the housing cost problem goes away. (And, incidently, if the housing cost problem diminishes, then so too do the Ellis Act payments owed by landlords under this proposal.)

With all the political saber-rattling that’s been going on in SF lately, any landlord with below-market rents on their units who is NOT in the process of Ellis Acting their building is a damn fool, and deserves to be stuck subsidizing their tenants for life.

lol, “profit” is an accounting concept and my reading of Campos’ proposal is that it doesn’t allow for any “entitlement” to “share” in any “profit”.
The proposal just makes an allowance for a set amount (the difference between a unit’s monthly rent and a “comparable” unit) to be paid. If I’m missing something, please point me to the part where the word “profit” or “net income” is mentioned in the proposal.
So I’m not going to fall for the obvious econotrolling, but thanks for playing.

Sierrajeff – in low inflation scenarios, that hugely benefits the tenant. Why? Rents can only rise 60% of inflation, whereas property tax can rise up to 2% per year. There’s been a single year in the last decade where rents and property tax have risen at the same rate.
THIS is why you get landlords complaining. That roof costs more to fix than the rents they’re getting, and the disparity grows every year. Saying that landlords “have prop 13” doesn’t mean anything, other than “prices go up faster than rents do, so there’s no incentive or ability to pay for repairs/improvements unless someone moves out”.

You are all missing the point, this is not about helping tenants or hurting landlords or making housing more affordable, it’s about promoting Campos and helping his career as a politician. All other consequences are completely irrelevant to him.

As a small property owner in SF – (3 unit building – I live in 1 of them) – I can tell you that each law that restricts my ability to manage my property pushes me closer to leaving units empty
I’m not a rich landlord…I bought derelict property and made it livable – exactly what the city wants but does nothing to reward
Another stupid-Spineless pandering Campos idea (I like David personally – but he’s a terrible administrator/legislator…)

Brahma, just like Campos you are simply giving prettier names to confiscation.
Campos doesn’t want to punish landlords, he wants to “combat displacement”. He knows we live in a capitalist society where politicians are not allowed to punish one class of citizen only for their financial status.
You feel it’s not profit sharing, but an “allowance”. Or “capital gain transfer from the landlord” which looks very much like profit to me.
This reeks of covert communism.

Brahma, whefe do you get the “first, last, security” notion?
This could amount in much more, a massive payout to a tenant.
Example: Mission renter paying $800 a month for a 2br of a 3 unit building. Been there 17 years, thought it was big bucks when he moved in. Had been bragging about his awesome landlord in the early 2000s. Has been boasting how smart he was and how dumb his landlord was since the downturn. Now cursing both elderly, retired former landlord as well as new 3-party landlords who have decided to Ellis, and live in the hip Mission. Gets Ellised. Finds Mission 2 br for $4500, receives $88,800. Boasts about how stupid former landlords are.

If it is so important to “combat displacement” , stop demonizing small property owners and provide them with city subsidies to encourage them NOT to Ellis Evict significantly under-market rent paying tenants.
Win-Win

Along the lines of this comment..”So… he’s trying to make sure no one ever rents an open unit ever again? Because why anyone would voluntarily subject them self to this, rather than cashing out by way of selling a TIC share makes absolutely no sense. Hooray for further diminished rental inventory and even higher rents!”…
I own a home with a small, unoccupied in-law unit separate from our home that will NEVER, EVER see a tenant. No Way! No How!!
Moronic legislation has consequences.

I’d gladly pay taxes on $88,000 (assuming someone gives me the $88,000 in the first place)!
I just don’t have that much sympathy for the core of the anti-rent control discussion here. There are so many exceptions to the ordinance, and regardless if we build more housing (none of which will be subject to rent control), then the housing cost problem ameliorates itself. From what I’ve seen, the biggest problem with rent control isn’t the concept per se, it’s the annual caps that were put in place about a decade ago – prior to that, the adjustments were much larger and seemed to more accurately keep pace with CPI.
My point about Prop 13 (which, by the way, I despise) is that it lets homeowners stay in homes long past the point that they could afford to do so, if they were being taxed on FMV. I do believe that renters should get some basic similar protection.

Let me get this straight.. If a building owner Ellis Acts a tenant paying $900 month for a unit that is now at a market rate of $5,000, the landlord would have to pay the tenant $120,000? And people actually accept this money in good conscience?

For a city that is in dire need of more housing I just can’t grasp at how proposing something like this will help. As a small landlord this assure I will never, ever rent a unit in this city again.
My next door neighbors already have a four unit building with no tenants – that way for ten years at this point.
Between us we will have eight units off the market sometime next year. Ten if we were encouraged in any way to legalize and update the in-laws the city shut down about twenty years ago.
It just makes more sense for us to enjoy living in the building ourselves and spread out. If rent control were removed tomorrow we would be renting right away knowing that we could be free of tenants at any point the initial lease was up.
Spread that out over the whole city. Has anybody done any count of the number of units sitting fallow because of rent control?

^ If you had a two year lease for a comercial space paying $900 per month with a market rate now at $5,000, and your landlord offered $120,000 to break the lease. You wouldn’t take it?
How is this any different?

Jesus, all the landlords in these comment threads really make me wish we could do away with Prop 13. Honestly, I have virtually no sympathy for landlords and anything that sticks it to them is pretty much fine by me. That said this is an overreach of authority by a city government.

SF wrote:
> Let me get this straight.. If a building
> owner Ellis Acts a tenant paying $900
> month for a unit that is now at a market
> rate of $5,000, the landlord would have to
> pay the tenant $120,000? And people actually
> accept this money in good conscience?
Plenty of people in SF have been taking $100K in cash (often without a 1099) to move out so the landlord can remodel and sell as a TIC (getting the $100K back and more).
Posted by: Sf at February

lol, I agree that “Campos doesn’t want to punish landlords”, but that’s beside the point: who said that he did?
I also agree that “he wants to ‘combat displacement’. That’s one of the things that makes this proposal so bloody brilliant; the amount paid to the ellis act-evicted tenant is based on what a “comparable” unit would rent for. So it’s driven by market forces, not an arbitrary legislative fiat. To the extent that rents for comparable units go up, the amount paid goes up.
That’s a twofer: it preempts a lot of legal attacks (because it’s got a rational basis; this is why anon is probably correct that it’s likely legal and will be upheld in court) and it uses market forces against speculators.
It’s a piece of political aikido in that way, and even if you personally disagree with Campos, you have to respect the adroit legislating on display here.

One thing that many might have missed in this extra layer of intervention:
The current “friendly” buy-outs that are happening today are made under the condition that the transaction is not recorded at the rental board.
If Ellis evictions are done with similar monetary compensation, this will make “friendly” buy-outs the more valuable, because Ellis evictions have a lot of strings attached.
In short, this is an incentive to negotiate a much higher buy-out amount.
The tenant will say “gimme 200K or you’ll have to Ellis me. I am getting 100K anyway, nothing to lose”

Brahma, I am not sure yo are familiar with the “market forces” you are talking about.
But it’s a very clever ploy: use the other’s language, even completely inappropriately, to convey the illusion you are trying to reach out.
But the result is all the same: an attempt at capturing OPM.

I am not sure if they understand that the main reason SF cannot build its utopian “everyone’s welcome except, well, people we do not like” is that SF is in CA which itself is contained in the US.

Ending rent control would kill 2 birds with one stone…2 – automatically flush out the delusional maladjusted forever malcontent who found a safe haven in SF.

Wow, just wow. That has to be the single most unself-aware comment you’ve posted on this site, ever.
As a self-interested, revenue-maximizing landlord (I’m assuming you’re not in the flip-to-TIC business), you should be in favor of Campos’ proposal because every tenant that is displaced by an ellis act eviction will now be a potential applicant for one of the units you have on the market in the future, and will have a first, last and security deposit in cash on hand, in an amount artificially increased over what it would otherwise be by the transfer from the previous landlord who wanted to exit the landlording business.
This translates to increased demand for your unit(s), and so you’ll have your pick of attractive potential tenants.
But you’re complaining about it instead of celebrating because you want to replace people who live here now, people you describe as “delusional maladjusted forever malcontent[s]” (which is just another way of saying people you “do not like”), with presumably other members of the bourgeoisie (like those in the business of flipping to TICs) or highly-paid, yet transient workers who aren’t in a position to buy and don’t mind being exploited by paying you and others in the landlord business relatively high rents.
So no one has the moral high ground and you’ve got just as much class identification motivating your position as Sam. Both sides are playing straight-up class warfare, of which this proposal is a skirmish. You just want to wage it downward and ending rent control is your preferred weapon.

If this passes, there will be momentum for more changes. For example, units built after 1979 are exempt from rent control.
This cut-off date seems arbitrary and might be an easy target in the next round of legislation.
Since the business plan for new rental building construction is based on present-day rents, limiting the growth of those rents shouldn’t effect the incentive for investors to build more rental housing.
If it did, then maybe the cut-off could become a sliding window — newly constructed units get 10 years of exemption, then fall under rent control…

To those people who say they aren’t renting in their 4-unit building now, because of rent control — yeah, it’d be a real b*tch to be locked into receiving $3000 or $4000 a month for each of those units that you’re already carrying financially all by yourself.
That’s like the flawed logic of people who say they don’t want a raise, because it will put them in a higher tax bracket!

Sierrajeff,
yeah, my downstairs neighbor was thinking the same thing as you 3 years ago. Now he has a tenant who is paying 30% under current market rate who will think twice about moving out. (3000 vs 4200)
Landlords are there for the long haul. In the next 25 years we are likely to have one of 2 bursts of higher than usual inflation. Think what prices were in 1990. Fast forward to today.

Markets adjust. This will adjust downward the price of multifamily buildings with below-market tenants in them. The people getting screwed are the people that have had below-market rents for years, as the new owner just factors this into his/her purchase price. That’s rich.
As long as there is an arbitrage opportunity being created by $900/month tenants in $5,000/month apartments that are privately owned, Ellis Act evictions will go on.

The question was asked, how many units are being held off the market in SF? In the late ’90s SPUR did an economic base study of the city, and found out, by comparing tax records, that there were some 10,000 units not being rented. It is probably much higher today, since rent control / eviction controls have been tightened. Imagine, what would happen to prevailing rents if 10,000 units suddenly came on the market.

Brahma, I am not sure yo are familiar with the “market forces” you are talking about.
I am quite familiar with them.
I was referring to the above post by the ss editor, to wit:

Supervisor David Campos will introduce legislation this afternoon that would require landlords in San Francisco who evoke the Ellis Act to pay evicted tenants the difference between their current rent and a comparable market rate unit, times twenty-four.

Emphasis added.
This means that the amount paid to evicted former tenants will be driven by the market price of replacement units.

@Brahma: “As a self-interested, revenue-maximizing landlord (I’m assuming you’re not in the flip-to-TIC business), you should be in favor of Campos’ proposal because every tenant that is displaced by an ellis act eviction will now be a potential applicant for one of the units you have on the market in the future, and will have a first, last and security deposit in cash on hand, in an amount artificially increased over what it would otherwise be by the transfer from the previous landlord who wanted to exit the landlording business.”
I’m not sure that having this one-time payout will affect the amount of monthly rent that most of these tenants are able to pay, which should be much more strongly determined by their monthly income. I think income is much more of a limiting factor than is cash on hand to pay a security deposit for most renters, and monthly rent matters far more to landlords as well. To say that landlords would be in favor of this, it seems to me you’d have to show that they would overall be able to charge so much more in monthly rent that it would recoup the amount they’d need to pay in payouts. Right? Someone please correct me if this doesn’t make sense.

This supports my long held opinion that only the foolish would buy rental property in San Francisco. No small investor should take the risk. Eventually the only buyers will be large companies with considerable management skills. They will buy at discounted prices because of all the regulation that only they will be able to follow.
Of course this is just the outcome that Campos and his fellow travelers want. We thought the end of the regime of Peskin and Daly meant sane government for San Francisco. It did not.

After reading the comments, it seems pretty obvious to me that if something like this got approved, it will get litigated fairly quickly.
The payouts that would be due for a 3 or 4 unit building with 20+ year tenants could potentially (and reasonably) reach $500K+ for the building. I can’t imagine a more punative, disproportionate penalty.
Your property is a total dump, and worth maybe $1M, and needs at least $250K in work done to it to bring it up to code, and make it even somewhat modernized? Suck it, cough up the half a mil first, loser.

I’m outraged by this on principle, not because I’m a landlord. I’m a former landlord of a rent-controlled 3-unit building. Was able to sell it as vacant 10 years ago. Today it’s a SFH and probably worth at least 3-4x what I paid for it back in 2000. It’s too bad that these rental units went off the market but I certainly can’t fault the buyer for doing what he did instead of dealing with over-protected tenants. Given enough capital I would have done the same thing.

I should clarify that I’m actually fully supportive of landlords’ ability to decide not to renew a lease, and thereby take a unit off the market – without the payment of *any* fee to the tenant, so long as the unit’s actually taken off the market. It’s private property, landlords should get to do what they want. Tenants have no property interest beyond the stated term of their lease.
I just feel that as long as the tenant is in that unit and being renewed, there’s nothing wrong with the application of (reasonable) rent control.

As a small property owner who rents out a unit in his building, I support this very specific regulation targeting the speculative arbitrage value of existing housing stock by dramatically increasing the transaction costs of the displacement, thereby reducing potential returns and removing some of the financial incentive to go through with the eviction.
The inevitable consequence will be that some but not all building owners perform the Ellis eviction before the sale – not everyone will want to get their hands dirty by kicking out their tenants. To head off the situation where you have an owner evicting then selling to the speculator, one approach might be to require the new owner to take on the 2-year payment in cases where there was less than 2 years between eviction and purchase.

This “speculative arbitrage” tenant advocates are denouncing leads to “price discovery”.
If there is no price discovery, you’re basically in the dark as far as the actual “value” of a building since the market is made by too many investors chasing too few buildings.
Are we ever learning anything from these past 12 years?
Making property more rare than it needs to be creates the speculation that you are trying to counter. Exhibit A: SF real estate market.
It
just
doesn’t
work

LJL, that’s an excellent point. I think you’re right that the rent most ellis act-evicted tenants are able to pay would be more strongly determined by their monthly income than by cash on hand to initiate a new lease.
To your second point, however, I think you’re missing the fact that we’re talking about two different groups of property owners. The first group is using the ellis act to exit the business, which is what the ellis act was ostensibly designed for.
The second group is still in the rental property business and they are the ones that are the primary beneficiary, because they’re getting essentially a transfer payment from the people exiting the business and speculators. Unless a tenant receiving one of these payments turns around and uses it for a down payment on their own place (that is, for a purchase), no matter how much it is, that amount is eventually going to wind up in some other landlord’s pocket.
I’m assuming these are distinct groups of people. I don’t think it’s at all unlikely that the second group will be able to avoid making any payouts under this proposal. That could definitely be wrong if substantial numbers of landlords are also trying to “flip-to-TIC”.
I still think the advantage goes to landlords who aren’t “flipping-to-TIC”.

There’s just not enough analysis to know if this is a good deal for tenants or a good deal for landlords. It’s entirely possible that the mandated payment wouldn’t be enormous, and the law might actually serve as a safe harbor for landlords, facilitating more Ellis Act evictions than it deters.
Proceed with caution.

If you are even considering doing an Ellis – DO IT NOW! Last one out is a rotten egg.
This whole thing is an obvious attempt to usurp state law. Campos will only succeed to tying up the courts a bit. In the end, this will pass the way of Prop G.

“mandated payment wouldn’t be enormous” ? No, clearly the payments could be quite large. I mean, very clearly. Imagine a 4 unit where all four tenants are paying dated, subsidized rents. That could easily run to a half million or more. Clearly.

As with most of SF rent control provisions the cost of this measure will be most detrimental to small time landlords. The larger landlords have been good at passing through operating cost increases as well as capital improvement costs while small landlords generally do not do so. The fact that tenant groups paint every landlord as part of the “greedy 1%” and advocate for increasingly punitive restrictions illustrates their disdain for property rights. Property is not theft!

Brahma-
I am having a hard time understanding why we expect that this payout will end up in another landlord’s pocket as opposed to staying in the former renter’s bank account or being used for a down payment, etc. unless we think that it increases the amount that these renters will be willing and able to pay monthly to a new landlord? If am a tenant able to afford $1500/month and get a buyout of $100,000, I would look to relocate to another rental at ~$1500/month (maybe East Bay?) rather than spend down that 100,000 on a $4,000/mo. rental that I know I won’t be able to stay in for more than a few years. Again, happy to be corrected if I’m wrong about this.

Are there really still that many votes in communism?
As long as San Francisco and California, as a whole, keep voting for the Democrats/commie libs, the answer is YES!!! Hey, SF gets what it wishes for. SF will ALWAYS be crawling with commies.

I am having a hard time understanding why we expect that this payout will end up in another landlord’s pocket as opposed to staying in the former renter’s bank account or being used for a down payment, etc. unless we think that it increases the amount that these renters will be willing and able to pay monthly to a new landlord?

I think we can all agree that these payments will increase the amount that these renters will be able to pay to a new landlord, whether or not they are willing is another matter.
I think that the majority of renters are going to want to use these payments to stay in S.F.; at least that’s the intent. Here’s what Campos said in the Chronicle piece (link above, Page 2, ‘graph 5):

Campos, however, was careful to stress that the proposal is aimed solely at keeping tenants in San Francisco, not discouraging Ellis Act evictions. He noted that past court cases have made clear that cities have a right to implement policies aimed at combatting displacement.

…but I’m willing to look at data that might change my view.
One thing that’s a natural follow-on from your previous point about financial wherewithal of current tenants to rent a replacement unit is that just because a tenant has one of these payments in hand doesn’t mean she’ll be able to qualify for a mortgage, even if we accept, for the sake of argument, Truth’s assertion that these payment will amount to “a massive payout to a tenant”.
You would still need to have the household income to support the PITI, especially nowadays. That would be even harder, financially speaking, than getting into a replacement rental unit at a higher rent, I would think.
So I don’t think an appreciable number of these payments are going to be used for a down payment for purchase. But if they are, good for the former tenant! They have a new place and are on their way to building equity, and the owner of their former building gets out of the landlording business and out from under the oppresive yoke of the hated, hated rent control that we all know is a sin against all that is the all-loving Free Market.

If someone who is on fixed income, currently paying $800/mo in rent, gets a one time payment of 100K+, it would be extremely financially imprudent for them to use that money to rent a new place for $4k/mo. I can’t see how this would combat displacement because what happens after 2 yrs and that money runs out? It’s not like 2 yrs guarantees a low-income renter can get into BMR housing or get a much higher income. I think this has a decent change to get struck down in court unless a hard cap of 25-50K is placed on the max payout. Or else why two years, why not 3 yrs rent, 4 yrs rent, or rent for life? At what point does it become punitive or excessive for the landlord? I think 12 mo rent/50K cap would have a much better chance of holding up in court.

No, Brahma. You don’t know that the majority of renters getting these huge payouts, I mean extortion payments, are going to use this money to stay in SF.
Many could take this money and move elsewhere and buy a nice house or condo and pay cash.
But many will just use the money to move “up” and pay more for a nicer apartment, that is now more expensive after the move out/reno.
Doing nothing to solve the cost of housing in SF. And I’m basically ok with that. A property owner should be able to do what they choose with their property; rent for what the market will pay, keep it vacant, reno it, turn it into condos.
All good.

A person on an income that doesn’t support a higher rent isn’t going to qualify for a lease anyway, regardless of a lump sum of money in the bank.
The most likely scenario in all of these cases is a lump sum payout and the person moving out of SF for cheaper locales, unless they can afford market rate anyway. So in that case it’s just a basic income transfer from landlord to rich tenant.

If someone who is on fixed income, currently paying $800/mo in rent, gets a one time payment of 100K+, it would be extremely financially imprudent for them to use that money to rent a new place for $4k/mo. I can’t see how this would combat displacement because what happens after 2 yrs and that money runs out? It’s not like 2 yrs guarantees a low-income renter can get into BMR housing or get a much higher income. I think this has a decent change to get struck down in court unless a hard cap of 25-50K is placed on the max payout. Or else why two years, why not 3 yrs rent, 4 yrs rent, or rent for life? At what point does it become punitive or excessive for the landlord? I think 12 mo rent/50K cap would have a much better chance of holding up in court.

Brahma,
This is a hypothetical, but if you were in this situation and got a payout to leave a rent-controlled apartment, I’d be curious what you would do with the money?
Like I said, if it’s me, I think I’m putting it away for a down payment or retirement or whatever and moving to a place I can afford. Granted, some of these renters can likely afford much more than they are currently paying, but many likely cannot.

re: Absolut
“If someone who is on fixed income, currently paying $800/mo in rent, gets a one time payment of 100K+, it would be extremely financially imprudent for them to use that money to rent a new place for $4k/mo.”
Haha, the most devious thought EVER. So, you have rent controlled tenants, living off of some form of disability benefit (which of course is means tested). Ellis the building, and at least you get something for your payout – you kill off their benefits due to the windfall payment.
Oh wow, I can see someone being spiteful and doing this sort of thing just for that reason alone if it passed. Good (diabolical) stuff.

R, if I were a group interested in a legal challenge to this, I think that would be my poster child. Find some wealthy rent-controlled tenant entitled to a big payday through this ordinance, and attack the nonsensical arbitrariness of it.

” Find some wealthy rent-controlled tenant entitled to a big payday through this ordinance, and attack the nonsensical arbitrariness of it.”
Seems dicey.
Economically, all the tenant gets after tax is about a year and a half of living in an equivalent apartment for their current rent. Plus the hassle of moving. This might be a high dollar amount, but only because rents are currently very high. When rents are very high it will be hard to argue both economically and politically that landlords are being excessively targeted.
The example above of a $500k+ payout on a building worth $750k ($1M less $250k deferred maintenance) isn’t realistic either. A $500k payout would mean that market rents would be $250k plus what the current tenants are paying. Roughly if the current rents were covering operating expenses, $250k/year net on a $750k building would be a 33% cap rate. Backtracking from a more reasonable 7% cap rate, you’d expect to see that $500k payout going on a building worth around $3.5M
Now, I’m sure that people can argue the numbers, but that points out the real area that will attract litigation which is the determination of “comparable” units.
Mainly, this is just political resume building by Campos. There aren’t that many Ellis evictions anyway and large payouts are already a fact of life. It’ll certainly combat displacement of landlord/tenant lawyers though. Probably help pay down some school loans and throw in some kitchen remodels.

What sort of math are you using? A ~500K payout is very realistic for a four unit bldg under the formula (new rent – old rent * 24* 4). Where do you get the idea that cap rates fits into
this? You’re applying a comparative quality analysis that hasn’t been inserted into the discussion. No, think 2 br, Mission. Whether crap apartment or not they’re going for huge bucks.
And Brahma, you’re all over the place. You started off with “first, last, and security” utter misreading, then onto how campos’s idea is brilliant as based upon a comparable unit, then onto tenants sticking around and paying big bucks, then flip flopping on that. Come on already. Like it isn’t obvious when a poster just likes to play devil’s advocate for fun.

“What sort of math are you using?”
“Where do you get the idea that cap rates fits into this? ”
Re-Read my post.
The payout is tied to rents and cap rate ties rent to valuation. So you can ballpark the ratio of payout to valuation. Of course there is enough play there that it’s inevitable that there will be litigation on a case by case basis.
“Whether crap apartment or not they’re going for huge bucks.”
That’s exactly the point. Huge payouts will go with property selling for huge bucks.

“You cannot ballpark the ratio of payout to valuation. It is tied to the length of time the tenant has been in the unit, chiefly.”
The lowest rent anyone could be paying is zero, so yes you can ballpark some ratios and see that extreme cases like a $500k payout on a $750k building won’t happen. Ratios like that would almost certainly get the law tossed for being excessive and punitive.
Go find a realtor and tell him that you want to buy a building in the city with $250k yearly rental income and you want to pay $750k and see what happens.

500K payout on a 750K building probably wouldn’t happen, but 300K is very possible. For example, for a 4-unit building with long term protected tenants might only be collecting 30K/yr in currently rent, but might easily fetch 180K in the open market if the units were slightly updated. How much do you think such a building would sell for? Especially if this legislation is enacted?

Anonprime you are conversing with yourself. Asking a realtor to find a 250k gross rent and 750k purchase is off topic. And OK, 500K payouts on a 4 unit might be high, but as Absolut notes, 300 or so is easily understood. And that’s for 2 brs. If you don’t think there are 3 br units in the Mission, NOPA, SOMA and Lower Haight being rented for sub $1000, you’re either deluded or haven’t lived here very long. A 3 unit 3 br each rundown fixer Victorian? Now we’re talking mid 400ks or higher for a probably $1m type of property.

Yeah but you gotta find equivalent condition, size, etc. units? How? No one is going to pay $5000/mo for a rundown unrenovated 3-br… which is what the evicted tenants will be leaving. How do you account for condition? Age? Years since last major renovation. Quality of the renovation. Other factors (location, views, etc). The market is so granular … how could this possibly ever work?

“How much do you think such a building would sell for? ”
Well, that’s where average cap rate comes in. If the current $30k was just covering expenses, then you have $150k net. On a $750k building that would be a 20% cap rate which seems very high for what you can actually find. I think SF median cap rate is about 5% so you’d expect something south of the $3M range.
@Truth — I’m honestly not sure what your point is here. People raised the possibility that there could be huge payments imposed on buildings with little value. But that implies that you could get buildings for low valuations which collect large rents, which isn’t realistic. You agree that payouts could be large because rents are large and you also agree that these buildings sell for huge bucks. So I’m not sure what exactly you’re disagreeing with.
“Yeah but you gotta find equivalent condition, size, etc. units? How? ”
Exactly. This is what is guaranteed to be a litigation pit as both sides argue about what constitutes equivalent condition.

No, payouts would be large because long tenured rent control rents are small and market rents are large. Linked to this, the building market value is low because long tenured rent control rents are low, and because tenants rents don’t offer upkeep incemtive, it’s likely the building is a fixer to some extent.
And jimmy, 3 brs in “cool” areas won’t get 5k even if somewhat run down? Sure about that? Given today’s roommate culture? $1666 a person? I think you’re mistaken.
So yes, the ~1m type property, and 400k plus payout scenario is out there ahould this go forward. It’s utterly ridiculous. And yes, agreed, lawsuits will fly.

“Linked to this, the building market value is low because long tenured rent control rents are low, ”
But that’s the whole point of the Ellis is to get rid of the low long tenured rents.
And thats why as others have pointed out, things will usually end up as a voluntary payout so the building will get it’s huge market value quickly rather than after waiting in the Ellis penalty box. (Or going to TICs)

Catching up on the talk about what a tenant will do with the extortion money.
Say I am Joe Tenant coming to an open house for a 4K place with my 7K paycheck. Then I tell the owner: my paycheck might be a bit small but hey, but I have gotten 120K extortion money on my last rental!
As a landlord, I would 1) – NOT consider the fact that the tenant is liquid, because this is a one time deal and 2) – if you are renting to these extortionists you are perpetuating the system. I would empathize with the former landlord who had a leech sucking him dry DURING and AFTER the rental.
Plus a tenant would not probably mention it. You don’t brag about screwing over a landlord when meeting another landlord.
But let’s not kid ourselves, despite what Campos tries to convey.
This is a punishment and a preventive strike against landlords, not a financial aid or compensation of some kind. But a punishment is illegal, therefore they can’t present it that way.
That pig has a ton of lipstick on it, and they have covered it with perfume because it really reeks of BS.

If someone who is on fixed income, currently paying $800/mo in rent, gets a one time payment of 100K+, it would be extremely financially imprudent for them to use that money to rent a new place for $4k/mo. I can’t see how this would combat displacement because what happens after 2 yrs and that money runs out?

And the reality is that people do “extremely financially imprudent” things all the time, especially in this town, and especially when they have no hope of joining the owning class unless —as you’ve allowed— they hit the BMR housing lottery.
All you need to do to convince yourself of that is look at all the people who are paying well over 30% of household income on rent, now, irrespective of whether they’re in a rent controlled unit or not.
A person getting Ellis-act evicted is still getting s—-d, either way, but with the payouts, less so. And I still think the payout just amounts to a transfer payment from one landlord to another one.

I think this has a decent change to get struck down in court unless a hard cap of 25-50K is placed on the max payout. Or else why two years, why not 3 yrs rent, 4 yrs rent, or rent for life?…I think 12 mo rent/50K cap would have a much better chance of holding up in court.

I can’t figure out of this is a troll or not.
You have it exactly backwards. The fact that the amount is almost completely dependent on the market rate rent of a comparable unit is what would make it hold up in court. If there was a “hard cap of 25-50K” in the legislation, then a pretty straightforward line of legal attack would be that the 25-50K amount is arbitrary.
Here’s what Campos said in the above-linked piece:

“I think we are striking a balance by letting market forces govern what relocation costs look like. It is the fairest way to both sides,” he said. “We are confident it would survive a legal challenge. …It’s taken a long time to draft this, and it’s consistent with the guidance courts have given us.”

Emphasis mine.
If anything, Campus could (and probably should), remove the $5,261 “floor” on the payout amount to make the dependence on market forces even more obvious to ideologically-driven libertarian appeals court judges.

One thing I CAN say is that with all these noises about limiting Ellis evictions, if I were in a position to consider an Ellis eviction, I would do it NOW and not wait!
We’ll see how big a problem this is if there is a surge in Ellis Act evictions; currently they are running quite a bit below historical rates.

Brahma, lol on the “ideologically-driven libertarian appeals court judge” comment.
In your posts anyone who does not agree with the extreme brand of populism that Campos is selling has to be libertarian. In that case most of America is “libertarian” by this definition.

And I still think the payout just amounts to a transfer payment from one landlord to another one.
Even if this is so, how can you possibly assume that it is a transfer payment from one SF landlord to another SF landlord? And if it’s mostly going to be transfer payments to landlords in other jurisdictions, it seems a stretch to call this help for displacement (I’m not convinced “displacement” is a problem in and of itself, but that’s another matter).

Quick back-of the envelope calculation
Tenant moves into a 2/1 in 1994. He pays 900/month.
In 2014 with allowed adjustments he pays 1200 today. Over the past 20 years he has paid roughly 250K in rent.
Since the average market rent in the past 20 years should have been in the range of 2200 (emphasis on average), he should have paid 600K in rent without rent control.
Then he gets Ellised, and his unit is valued at 4500/month, but this new rule gives him a subsidy of ~80K (3300*24) which is roughly 6 years of rent he has already paid.
It’s not free living but pretty close. This is not morally defensible by any measure. Is the tenant a business partner? Has he shared any risk with the landlord? And more importantly how can I get my share of free money?!!!

Brahma: was not trying to troll. My point was that I don’t think the court will care if the amount is arbitrary or not, simply that it is not excessive or punitive. Putting a reasonable cap on the payment is the way to do.
The current payout is an “arbitrary” amount, and that stood up in court.
Plus, how is 2 years not just arbitrary as any amount? Unless the city can show that all evicted tenants will be able to win the BMR lottery in 2 years or something.
Also, as far as doing things that are financially imprudent, there’s a big difference between paying 40-50% of your monthly income on market rent vs someone on fixed income paying 200% of their monthly income, relying on a windfall that will last less than 2 years. The former is unwise, the latter is insane.

Actually, if a tenant came to me with for a 6K rent with a 3K income using a big one-time cash payout to make up for it, I could take the jump. After all his cash will last long enough to make it interesting (2 years tops) but not long enough to be a problem.
Then again I think most tenants will take the money and run (to Daly).

Brahma,
I guess what I’m driving at is that there seems to me to be enough doubt about what tenants would do with this money to call into question your assertion that it is essentially a transfer of $$ from one landlord to the next. Some may spend it on a new rental, certainly, but it seems very unlikely that all tenants will do so. So I think it’s hard to argue that this is a direct transfer from one landlord to another and that landlords should be in favor of it. It pretty clearly benefits rent-controlled tenants at the expense of the landlords hoping to evict them. Though I agree it would suck to lose a rent-controlled apartment…the fact that I think many tenants would leave if given a buyout speaks to that, I guess. I’m just not sure why you’re trying to convince anyone that this is good for landlords.

Gotta agree with @lol– if a tenant came with a massive cash subsidy and no hope of increasing their income enough to cover the market rent beyond the two-year mark — GREAT! They will be moving out in two years or less, allowing me to raise the rent YET AGAIN. THAT is music to my ears. Nothing worse than a tenant who sticks around for two decades paying a fraction of market rent.

Yeah, but that’s just hypothetical. A person who would waste away that much capital for no real upgrade in living situation doesn’t exist. Most likely outcomes: the person will probably blow it on toys and travel (this is America after all), or sock away the cash, or use it to purchase property in a cheaper area.
As I have said before this sum is not about making the tenant better off, but to threaten and punish the landlord who would dare to exercise his right under the Ellis act.

It is a tax on exiting the landlord/rental business. It is due when a building is ellis’d so that building and its owner are out of the landlord business for a decade, meaning the building will be owner occupied, likely TIC’s since you can’t condo convert any newly emptied buildings.
If it passed and was upheld, the money would be coming from buyers who would be looking to empty a building and sell off TIC’s. These buyers would factor the payments into the cost of the building, which would lower the amount they paid for the building. Which is going to reduce the payment to the person selling their rental units (exiting the landlord business).

It is not a tax because taxes are collected by the government to be used according to a legislator-sanctioned budget.
Rent control advocates are having a hard time rationalizing this extortion money. But you can see them drooling at OPM that they know is now within their reach.

This type of proposal is embarrassing. The idea that a landlord would be responsible for paying the difference in rates for TWENTY FOUR months is ridiculous. It assumes positive cash flow on the landlord’s part and that the renters can’t afford to pay market rate. I know people who make six figure incomes that live in rent controlled, large apartments in great neighborhoods and would never consider moving or buying because it doesn’t make economic sense. I think San Francisco politicians shold stop showboating just to get attention.

Campos has a complete disregard for property ownership laws. Is he a home owner at all?
Here is my problem with San Francisco rent control laws: they don’t necessary protect low income families, children, elderly. It is a seniority based system that allows a lot of well to do tenants to remain in control..for decades..
I personally know few millionaires retirees who are protected tenants in very nice neighborhoods, with substantial mutual funds investments, vacation properties outside of SF and are very well traveled. In my opinion, the rent control laws should have an income and assets base to begin with..if you want to talk rent control. Who are we really protecting here?

“Dependence breeds hatred. Only free men can afford to be benevolent. Only free men can love and respect one another.” | Ayn Rand letter to Reverend Dudley
As an owner of a 3 unit building (2 of which are vacant), I am growing to hate you leaching tenants and your idiot leaders more and more. I will keep my beautiful 3 bedroom 2 bath bay view units vacant until the system break because renting them out is like picking up pennies in front of a steamroller… it works for a while then you get crushed. F you Campos!

“It is not a tax because taxes are collected by the government to be used according to a legislator-sanctioned budget.”
Only if you are so limited in your thinking that everything is defined by some technical legalistic definition with no regard to how it operates. Politicans love it when people think like that.
The tax on bags is called a fee but it is still a tax even though it is collected by stores and they get to keep it.
Answer this question, does this have the same effect of the government taking the money from the owner doing the Ellis Act eviction and giving it to the tenant? That would meet your narrow definition of a “tax”. In practice this just eliminates the government as the middle man from the transaction but it operates in the same way as a government tax and a government expenditure.
Just because the government does not like to call things “taxes” does not mean that they are not just taxes with new names. Personally I have a broader definition of a tax, the main elements of it being, 1) the government makes it mandatory, 2) the government deterimine how it is calculated, 3) the government controls who receives the funds. These are the three main elements for me in considering what is a tax and this payment clearly meets all three elements.

No these are not taxes in my book. But to everyone his own.
What bugs me most about this indiscriminate collection and redistribution of wealth is that it is done precisely outside any kind of oversight or reasonable management.
When you need to build roads you collect taxes and then the money is distributed based on a set of criteria. And the government is in the best position to decide what the priorities are.
For education, we are doing the same things: there’s a budget, money is distributed based on needs, policy, etc.
But for housing, which is the biggest budget item of most households and sometimes bigger than taxes, SF has decided it wouldn’t interfere with how, from who or to who the subsidies related to rent control are flowing. For a pretty small big city like SF, the amounts of these subsidies are mind-boggling. I did another back-of-the-envelope calculation last year that showed that the current subsidy amounted to Billions every year. Everyone is up in arms over a few Millions for the AC but the elephant in the room does not seem to bother many at City Hall.
These Billions are distributed from one class of people to another class of people without ANY involvement from the government, but they are mandated by the government.
Now the City is perpetuating this hands-off strategy by forcing an extra transfer of wealth from one class of people to the other one without ANY objective involvement apart from “you do this, you have to pay that”.
What are we paying City Hall for? If they want a subsidy to one class of people, at least they should have a structure into place that decides whether this subsidy is going to the people who need it most.
A tax comes with oversight. A tax comes with accountability. Rent control and Ellis penalties are just showing the laziness and hypocrisy of City Hall. In the mean time tenants are helping themselves with OPM with total impunity.
[/end friday rant]

It is both a tax and a redistribution. It is a tax so far as it forces owners to subsidize the housing responsibility of the state. It is a redistribution so far as it subsidizes tenants regardless of means and artificially elevates the rents in new buildings. It is interesting to note that big guys like Jay Paul, Essex benefit disproportionately from rent control. It is no coincidence that they are among the largest contributors to politicians in this city.

My feeling is that this WILL get overturned in court. The Ellis act specifically states that the relocation expenses can’t be onerous, which de facto hinders landlord of their tight to go out of business. The $5000-13000 relocation payment was approved as being fair. With 24 month’s payment per unit, how could that not be considered onerous?

David Compos is a communist. The board of supervisors has been hijacked by the Communist Party. The Communist Party of San Francisco has gone too far this time. As an elderly owner of a 3-unit building in San Francisco. The Communist Party has ruined my life. I am now supporting three protected tenants in my building with my social security check. I cannot afford to evict them. My tenants are millionaires who love David Compos and his Communist party. God help us….

Poor elderly landlord –
I feel you. My family was in the same position for 20 years. We saved up enough to eventually buy out 2 tenants under an Ellis threat. We won’t ever rent again. If you can swing it – Ellis them before this legislation comes in effect. The only way to fix the system is to break it.

^ I am not sure about the communism statement. Maybe “wannabe” communism, but I am sure of one thing: the City has painted itself into a corner and instead of doing the right thing and acknowledging the absurdity of the situation, they prefer to go further into the theoretical assumption that adverse effects of failed policy can be resolved by strengthening these same failed policy.
Hey, it will work this time, right? And if it doesn’t, they can always add more rules.

“i will loan you the money to ELlis them if you will sell me the building at a discount. you can live off the profits.”
That’s exactly why the whole “poor” thing is BS. After a small payout he’ll have more money then most people in the US ever see in generations.

yes, but they are cash poor until the can either charge market rate or unload the units. unfair for landlord to sit on that value and live SS paycheck to paycheck.
i just think we should get rid of rent control for any houshold making over $50K/yr, unless the person is over 65.
Otherwise property owners should be able to evict and sell

If it ain’t cash in your pocket it don’t mean nothing! What good is owning a valuable building if the value is never unlocked until you are dead?
By the way, I have one tenant left – a hedge fund manager. I assure you he does not need rent control. While a few tenants benefit, in general rents are out of control because of rent control.

Is there no help at all for landlords! Our situation is our uncle who is elderly (87)with early signs of dementia. Unfortunately we are looking at having to sell his home in order to put him into an assisted living facility. He has a tenant who has been living there for close to 9 years. Nice 2 bedroom unit for under $900. I think he knows there is going to be some changes in the near future, so he is now actively becoming demanding. He is suing our uncle in small claims court for a number of things. He is also demanding upgrades, and constantly harrassing our uncle making all kinds of demands. We have asked him to please contact us since we now have power of attorney. This tenant leaves nasty notes and at this point our poor uncle is afraid to interact with his tenant. WE have called and asked for help with Senior agencies etc, everyone tells us they cannot help a landlord, they are their to help the tenant. Is there any help for a landlord? We hate to have to pay this tenant all the saving our uncle has saved because it is going to be used to put him into a home, if there is anything left. I have no idea how many more law suits he is going to throw at him. Its as if he spends his days looking at all the rights of a tenant, down to knowing all the codes. Please any help or where to go for help?

Sounds like this may be a case of Elder Abuse. (That might be a tough one to prove in SF but I would allege it). Call the SFAA or the Small Property Owners Association. You need an SF Landlord Attorney. If you are too cheap to hire one like most SF property owners, you will get everything you deserve.